Explain How Articles Of Association Can Be Changed 5 / 6

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Question 2abc

Fred is a member of Glad Ltd, a small publishing company, holding 100 of its 500 shares. The other 400 shares are held by four other members.

It has recently become apparent that Fred has set up a rival business to Glad Ltd and the other members have decided that he should be expelled from the company. To that end they propose to alter the articles of association to include a new power to ‘require any member to transfer their shares for fair value to the other members upon the passing of a resolution so to do’.

Required:

(a)

State the procedure which Glad Ltd must follow to alter its articles of association.

(b)

Explain the effect of the requirement that any alteration to a company’s articles of association must be for the benefit of the company as a whole.

(c)

Explain whether or not the articles of association of Glad Ltd can be altered as proposed.

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Question 6b

In the context of the formation of companies, explain:

(b) the articles of association, paying particular regard to how these can be altered.

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Question 9b

In 2008, Dee, Fi, Gee and Ki formed a private limited company to pursue chemical research. They each took 100 shares in the company and each of them became a director in the company. The articles of association of the company were drawn up to state that Dee, a qualified accountant, was to act as the company secretary for a period of five years, at a yearly salary of £20,000.

In May 2012, Fi, Gee and Ki discovered that Dee had passed on some research results to a rival company.

As a consequence, Fi, Gee and Ki propose the following measures:

(b)

to dismiss Dee from her post as company secretary without any payment for the work she has already done, in spite of Dee’s claim that she has a contract of employment by virtue of the articles of association and that she
cannot be removed before the five-year period is completed;

Required:

Advise Fi, Gee and Ki as to the legality of the above proposals and how they may be achieved.

Note: The split of the mark allocation is shown against each of the proposals above.

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Question 9c

In 2008, Dee, Fi, Gee and Ki formed a private limited company to pursue chemical research. They each took 100 shares in the company and each of them became a director in the company. The articles of association of the company were drawn up to state that Dee, a qualified accountant, was to act as the company secretary for a period of five years, at a yearly salary of £20,000.

In May 2012, Fi, Gee and Ki discovered that Dee had passed on some research results to a rival company.

As a consequence, Fi, Gee and Ki propose the following measures:

(c) to alter the articles of association to require Dee to sell her shares to them.

Required:

Advise Fi, Gee and Ki as to the legality of the above proposals and how they may be achieved.

Note: The split of the mark allocation is shown against each of the proposals above.

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